Can you get car insurance with a bad credit score?

A poor credit score can make it harder to borrow money. It can also affect agreements such as mortgages, mobile phone contracts and even credit cards, but what about car insurance? Here, we discuss the impact of bad credit on getting car cover.

Do car insurance providers check my credit report?

The short answer is yes, insurance providers will usually check your credit report, but they can carry out one of two types of check:

Soft search

Running a soft search means the insurer will simply use your credit information to check your personal details. For example, your name, age and address. If an insurance provider (or any other lender) carries out a soft search on your credit report, you’re the only one that can see that this has been done.

Hard search

This is the opposite of a soft search, so insurers and lenders will look at your credit report with more scrutiny. Lenders do this in order to work out whether you’re likely to pay back what you owe. It means they’ll go into much greater detail and check if repayments were made on time or otherwise.

Unlike soft searches, hard searches leave what’s called a ‘footprint’ and other lenders will be able to see that a search has been carried out. If you’ve made lots of applications for credit, especially within a short space of time, it can be a red flag for lenders. This is because it can appear that you’re having problems with money and need credit. Based on this, lenders could reject your request for a loan or credit.

How do insurers decide whether to run a soft search or hard search?

If you choose to pay for your car insurance annually, insurers will usually only run a soft search to verify your personal details.

However, if you want to pay for annual cover in monthly instalments, you can expect the insurer to carry out a hard search. This is down to the fact that you’re essentially making a credit agreement, where the insurer agrees to provide you with annual cover on the promise that you’ll pay them each month.

Will a poor credit rating affect my car insurance?

When it comes to calculating your premium, insurers will consider a number of factors, for instance, your age, address and the type of car you have. So, while a poor credit score can affect what you pay for car insurance, it’s not the only consideration.

It’s worth knowing that some research suggests drivers with a low credit rating are more likely to make a claim. This data can mean your insurer charges you slightly more compared to someone with a good or excellent credit history.

If you decide to pay for your policy in one lump sum, the price you’re quoted is the price you’ll pay (plus any extras you agree to). If you ask to pay in instalments, you can expect to be charged interest, which means you’ll pay more overall over the course of the year.

Can I pay for car insurance monthly with bad credit?

Yes, you can but your choice of provider may be limited. It’s also important to know that if you’ve had a policy cancelled by the insurer because of non-payment, some insurers might not cover you at all. Nevertheless, this shouldn’t stop you from asking about paying in instalments as some insurers look at applications on a case-by-case basis.

It’s worth remembering that if you want to pay in monthly instalments, a hard search will be carried out on your credit report. Your policy will also cost more in total as you’ll be paying interest too.

Could paying for my car insurance monthly improve my credit score?

It can – as long as you make your payments on time and in full each month. If you miss a repayment or don’t pay what you owe, it’s likely to have the opposite effect and have a negative impact on your long-term credit score.

Can I be refused car insurance if I have bad credit?

This really depends on the insurer’s own stance on customers with poor credit ratings. But for most insurers, simply having a low credit score shouldn’t stop you from getting car insurance altogether – although you might have to pay more, especially if you’re paying in instalments.

Broadly speaking, an insurer is more likely to refuse you cover if you’ve had a previous policy cancelled by a provider.

Should I check my own credit rating?

Yes, and lots of financial experts recommend that you do. Regularly checking your own credit report can help you identify mistakes and give you peace of mind.

In the UK, there are three main agencies that collect and record credit data (known as credit reference agencies or CRAs for short). You can check your details with all three usually for free. Try Totally Money to get your free credit score now:

If you notice anything wrong, including typos, let them know so the mistake can be corrected. In some instances, even minor errors like your name being incorrectly spelt can affect your report.

How can I buy cheap car insurance with bad credit?

If you can afford to pay for your policy in one go, this can save you money in the long run as you avoid interest. Try to build up your no claims bonus too and only claim for incidents if you really have to. More claim free driving means a bigger bonus and discount off your premium.

Don’t forget that you can also keep costs as low as possible by comparing a range of quotes from different insurers. A poor credit rating shouldn’t stop you from getting value for money and these ten tips to save money on car cover should help you find good, affordable insurance.